Topic: BlackRock: “The optimal BTC allocation is a large 84.9%” (Read 412 times)

Quote from: slaman29 on July 30, 2023, 04:02:42 AM

-snip-

A simple thought experiment can show that if Satoshi had kept all 21 million Bitcoins to himself and never shared this idea with anyone, the value of Bitcoin would be zero.

discuss

That makes sense because something of value is measured by its features, usability, demand and rarity. So when Satoshi introduced Bitcoin to the public, that's where the public will evaluate Bitcoin, whether it's worth it or not, it turns out that the market response was very good to the presence of Bitcoin and the price of Bitcoin began to increase.
And moreover, if only Satoshi had not made Bitcoin public, not only would the value of Bitcoin be zero, but also the cryptocurrency market would not exist and we would have no alternative for our transactions.

tw0.625

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Well, BlackRock doesn't have to care for any of that for it to mean anything. Lets say they actually do care, so what? Lets be objective and see that they've made so many big financial mistakes in the past that we should question the validity of their current and future actions.

I'm noy discriminating anyone based on their Bitcoin belief. Plenty of people genuinely thought they cared but that doesn't make them affect Bitcoin price.

BlackRock is the world's largest asset manager with ~$10 trillion currently in its portfolio.

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Quote from: Ale88 on July 30, 2023, 01:21:27 AM

Quote from: slaman29 on July 26, 2023, 12:26:46 AM

Before even starting a discussion on the statement I would like to discuss the originator of the statement, Blackrock itself.

Same Blackrock involved in $4B investment scandal with CEO and portfolio manager all involved.

My question is not about if bankers are good or bad, I don't care if I think they are bad. My question is, for someone who has history of making terrible investment advices, why should we listen to them about Bitcoin?

Those statements are not for us, and by us I mean bitcoiners, but are made for their investors. Does anyone really think that Blackrock cares about bitcoin, privacy, decentralization or other stuff like that? Of course not but if they sell their ETFs to their customers they are getting their commission, as simple as that. For them bitcoin is just another way to make money, we could be talking about shells or stones, it would be the same.

Well, BlackRock doesn't have to care for any of that for it to mean anything. Lets say they actually do care, so what? Lets be objective and see that they've made so many big financial mistakes in the past that we should question the validity of their current and future actions.

I'm noy discriminating anyone based on their Bitcoin belief. Plenty of people genuinely thought they cared but that doesn't make them affect Bitcoin price.

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Quote from: two.625 on July 30, 2023, 02:48:02 AM

It all depends on your strategy and risk appetite. If you think that converting 84.9% of your capital into Bitcoin 13 years ago was too big, then I'm afraid you might not have mastered basic mathematics in school.

If you got Bitcoin 13 years ago, it turned into 85% (or more) of your capital on it's own.

two.625

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Quote from: masyari on July 30, 2023, 02:43:52 AM

Media like clickbait articles and headers too much. It's obvious for anyone that 84.9 may be too big even for crypto believers

It all depends on your strategy and risk appetite. If you think that converting 84.9% of your capital into Bitcoin 13 years ago was too big, then I'm afraid you might not have mastered basic mathematics in school.

masyari

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Media like clickbait articles and headers too much. It's obvious for anyone that 84.9 may be too big even for crypto believers

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Quote from: franky1 on July 29, 2023, 11:04:57 PM

that linked article had many exampled positions with many different allocation amounts.. picking just the highest("EXTREME") mentioned is not what blackrock concludes.. their actual conclusion is a 3% position of btc allocation not 84.9%
also reading through other commercial banks desires to hoard bitcoin via the BIS settlement network agreements. they too want more then 2% but less than 5% ability to hoard BTC

and if you ever look at any investment institution none of them have high % hoarding of one asset. they all spread their eggs across many baskets with a sub 5% hoarding per 'egg'

The composition of Berkshire Hathaway's top 10 holdings of US stocks has changed, but Apple continues to make up nearly 50% of the portfolio.

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Quote from: HeRetiK on July 26, 2023, 08:58:25 AM

If you read the paper, the number quoted by OP (and various crypto-news outlets) is not even the conclusion. It's just the cherry picked result of one of two mathematical asset allocation models being applied to Bitcoin.

I saw already saw OP's title in the WO-thread, and checked the source. I tried to read it, but didn't understand most of it.
My gut feeling was that it is indeed cherry picked, and I'm pretty sure both BlackRock and the authors don't invest 85% in Bitcoin.

This is what the paper shows on top of each page:

Quote from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042239

FOR PROFESSIONAL, INSTITUTIONAL, QUALIFED, WHOLESALE INVESTORS AND PERMITTED,
PROFESSIONAL AND QUALIFIED CLIENT USE ONLY
– NOT FOR PUBLIC DISTRIBUTION (PLEASE READ IMPORTANT DISCLOSURES)

That explains why I don't understand it. This article isn't meant for me, you, OP or even Bitcointalk. It means nothing.

Ale88

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Quote from: slaman29 on July 26, 2023, 12:26:46 AM

Before even starting a discussion on the statement I would like to discuss the originator of the statement, Blackrock itself.

Same Blackrock involved in $4B investment scandal with CEO and portfolio manager all involved.

My question is not about if bankers are good or bad, I don't care if I think they are bad. My question is, for someone who has history of making terrible investment advices, why should we listen to them about Bitcoin?

Those statements are not for us, and by us I mean bitcoiners, but are made for their investors. Does anyone really think that Blackrock cares about bitcoin, privacy, decentralization or other stuff like that? Of course not but if they sell their ETFs to their customers they are getting their commission, as simple as that. For them bitcoin is just another way to make money, we could be talking about shells or stones, it would be the same.

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Quote from: franky1 on July 29, 2023, 11:04:57 PM

By reducing the positions held in stocks and bonds:

Quote from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042239

Starting with a 60-40 equity-bond portfolio, which is produced with a risk aversion of 𝛾 = 1.50, the optimal BTC allocation is a large 84.9%! The remainder of the portfolio, 15.1% is split 60-40 between equities and bonds.

that linked article had many exampled positions with many different allocation amounts.. picking just the highest("EXTREME") mentioned is not what blackrock concludes.. their actual conclusion is a 3% position of btc allocation not 84.9%
also reading through other commercial banks desires to hoard bitcoin via the BIS settlement network agreements. they too want more then 2% but less than 5% ability to hoard BTC

and if you ever look at any investment institution none of them have high % hoarding of one asset. they all spread their eggs across many baskets with a sub 5% hoarding per 'egg'

The question is how is this going to affect the price? 2-5% on these entities portfolios I assume is quite a lot of money dumped into BTC. The problem is, if (when) the recession hits, im not sure if it's a good idea to own BTC, so far it has just acted as SP500 on steroids, so a high risk asset (this is what BTC is considered still by most) would crash bigly, and these banks have customers and these customers wouldn't be happy.

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By reducing the positions held in stocks and bonds:

Quote from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042239

Starting with a 60-40 equity-bond portfolio, which is produced with a risk aversion of 𝛾 = 1.50, the optimal BTC allocation is a large 84.9%! The remainder of the portfolio, 15.1% is split 60-40 between equities and bonds.

that linked article had many exampled positions with many different allocation amounts.. picking just the highest("EXTREME") mentioned is not what blackrock concludes.. their actual conclusion is a 3% position of btc allocation not 84.9%
also reading through other commercial banks desires to hoard bitcoin via the BIS settlement network agreements. they too want more then 2% but less than 5% ability to hoard BTC

and if you ever look at any investment institution none of them have high % hoarding of one asset. they all spread their eggs across many baskets with a sub 5% hoarding per 'egg'

Ariaryanto

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I don't understand, how do you add crypto currencies to a 60/40 stocks/bond portfolio? Isn't it already at a 100, where do we get the 84.9% for Bitcoins from?

By reducing the positions held in stocks and bonds:

To me this number seems really high.

It is, and if you look at the paper itself you'll see it's just one particular way of modelling optimal exposure. Another model that they use in the paper comes to a more conventional conclusion of 9.5%.

Blackrock is the largest ETF company in the world and the main selling point of ETFs is to buy the index as it's cheap and offers a high level of diversification. Putting now almost everything into one investment seems very risky.

While BlackRock's ETFs offer diversification, it's still up to the individual investors themselves to stay reasonably diversified. If their filing for a Bitcoin ETF succeeds, it won't matter for BlackRock how your portfolio structured, as long as it contains ETFs on which they make money.

maybe from us giving each other directions we can become more broadly aware of the world of crypto, pliers where now in the future the world will become modern and make technology one of the fastest trading places.

KalOlak

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While BlackRock's ETFs offer diversification, it's still up to the individual investors themselves to stay reasonably diversified. If their filing for a Bitcoin ETF succeeds, it won't matter for BlackRock how your portfolio structured, as long as it contains ETFs on which they make money.

In fact, even a company like BlackRock has no idea what the price of Bitcoin will be in a year or ten years from now. Their strategy in this game is extremely simple - to collect fees from retail investors. Therefore, if the retail sector actively participates in this game, BlackRock will earn Bitcoin through fees from the players' trades. If the retail sector doesn't actively engage in the game, BlackRock won't lose anything. That's their strategy.

For example, if their fee constitutes 0.1% per trade of this ETF, and the trading volume of this ETF over 10 years reach 210,000,000 Bitcoins, then BlackRock's profit could end up being 210,000 Bitcoins after 10 years. However, I believe their fees will be much higher.

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I don't understand, how do you add crypto currencies to a 60/40 stocks/bond portfolio? Isn't it already at a 100, where do we get the 84.9% for Bitcoins from?

By reducing the positions held in stocks and bonds:

To me this number seems really high.

It is, and if you look at the paper itself you'll see it's just one particular way of modelling optimal exposure. Another model that they use in the paper comes to a more conventional conclusion of 9.5%.

Blackrock is the largest ETF company in the world and the main selling point of ETFs is to buy the index as it's cheap and offers a high level of diversification. Putting now almost everything into one investment seems very risky.

While BlackRock's ETFs offer diversification, it's still up to the individual investors themselves to stay reasonably diversified. If their filing for a Bitcoin ETF succeeds, it won't matter for BlackRock how your portfolio structured, as long as it contains ETFs on which they make money.

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Quote from: Darker45 on July 26, 2023, 07:15:47 PM

"Starting with 60-40 equity-bond portfolio, which is produced with a risk aversion of gamma=1.5, the optimal BTC allocation is a large 84.9%"

I don't understand, how do you add crypto currencies to a 60/40 stocks/bond portfolio? Isn't it already at a 100, where do we get the 84.9% for Bitcoins from? To me this number seems really high. Blackrock is the largest ETF company in the world and the main selling point of ETFs is to buy the index as it's cheap and offers a high level of diversification. Putting now almost everything into one investment seems very risky. And how do you come up with a fixed investment in Bitcoin of 2-3 BTC? Shouldn't the number be a percentage based on our total portfolio or net worth? The more money I have the more I would also put in bitcoins. Nothing wrong with owning 10 BTC if you are a millionaire.

HeRetiK

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I tried reading the entire paper but because of my very limited comprehension capacity of the technicalities the authors were talking about, I decided not to continue.

I assume those who cherry-picked didn't also thoroughly understand the paper. They spread the cherry-picked lines, nonetheless. OP is one of them. There are many others in social media who did the same. Even those who I think are capable of separating the wheat from the chaff are equally irresponsible for spreading it.

Worse, they are putting words in BlackRock's mouth. This isn't BlacRock's opinion. This is not a study done by BlackRock. BlackRock has nothing to do with it. Those who started spreading this fake news are just using the huge brand to create a baseless FOMO.

To be fair the paper is by a team entirely of BlackRock employees, with full disclosure of them working for BlackRock to the point that it even includes BlackRock's boilerplate disclaimer appendix, including copyright notice. So while it's not BlackRock's official opinion, it does indeed appear to be sanctioned by the company, at least to some extend. Either way, I don't think you'll ever find a company like BlackRock taking an official stance outside of carefully constructed messaging. Their CEO could say that the sky is blue and it would still come with the disclaimer that his views are his alone and do not express the views of BlackRock.

That being said, this kind of sensationalism does, in my opinion, not help Bitcoin's image. It's a stupidly high allocation that no one that isn't already convinced of crypto would take serious. Heck, even within crypto you'd probably be at the bleeding edge with this kind of allocation -- though admittedly, without active reallocation, Bitcoin tends to take portfolios over all by itself.

Darker45

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Quote from: HeRetiK on July 26, 2023, 08:58:25 AM

Quote from: Darker45 on July 25, 2023, 10:20:34 PM

Anyway, the subject is misleading. You should correct it lest it be misunderstood as a mega-bullish stand of BlackRock. This actually isn't BlackRock's opinion or view. This is simply the personal view of the three authors who happened to be working with BlackRock. But this study is not in any way sanctioned by BlackRock itself.

I'm not sure I'd even call it the personal view of the authors. If you read the paper, the number quoted by OP (and various crypto-news outlets) is not even the conclusion. It's just the cherry picked result of one of two mathematical asset allocation models being applied to Bitcoin. The other model they apply, Cumulative Prospect Theory, comes to a slightly different conclusion:

Quote from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042239

In order to obtain finite solutions, we change the mean of BTC in the normal regime to correspond to a loss of 90%. That is, we set exp(𝜇2) = 0.1, or 𝜇2 = −2.303. We also change the probability of the bliss regime to 𝑝 = 0.001, with the same mean, 𝜇1, and standard deviation, 𝜎1, of the BTC bliss regime as the empirical estimate reported in Exhibit 3. This distribution has the same extreme right-hand tail payoff as the original process, but it occurs with a much smaller probability, 𝑝 = 0.001, versus the empirical estimate of 𝑝 = 0.036. Even with this tiny probability, the optimal BTC holding is 9.5% holding the 28-72 equity-bond portfolio fixed in pro-rata allocations. Exhibit 7, Panel B plots the CPT utility function for the three-asset BTC-equities-bonds portfolio. The maximum utlity corresponds to the optimal BTC holding of 9.5%, with the equity and bond holdings being held in the same 28-72 pro-rata allocation for the remaining 90.5% of the portfolio.

TL;DR: The authors apply two models, one resulting in a BTC allocation of 84.9% and a risk averse one, resulting in a BTC allocation of 9.5%. The latter one is not newsworthy nowadays, so of course everyone is only focusing on the bigger number.

(even 9.5% percent would still be huge, mind you)

I tried reading the entire paper but because of my very limited comprehension capacity of the technicalities the authors were talking about, I decided not to continue.

I assume those who cherry-picked didn't also thoroughly understand the paper. They spread the cherry-picked lines, nonetheless. OP is one of them. There are many others in social media who did the same. Even those who I think are capable of separating the wheat from the chaff are equally irresponsible for spreading it.

Worse, they are putting words in BlackRock's mouth. This isn't BlacRock's opinion. This is not a study done by BlackRock. BlackRock has nothing to do with it. Those who started spreading this fake news are just using the huge brand to create a baseless FOMO.

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Quote from: MinoRaiola on July 26, 2023, 03:08:36 PM

Supply and demand handel the price and this is flexible as possible if no bank or authority can decide how much supply is available. The supply of Bitcoin is calculable and everyone can freely offer their Bitcoin. The demand is important to regulate the price, where there is no demand the price is low, but for example with breaking news, then the price can increases. Whether you % invest of your portfolio in Bitcoin or other is individual.

With zero supply, the demand can indeed be zero, but it can also be infinitely large.

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Supply and demand handel the price and this is flexible as possible if no bank or authority can decide how much supply is available. The supply of Bitcoin is calculable and everyone can freely offer their Bitcoin. The demand is important to regulate the price, where there is no demand the price is low, but for example with breaking news, then the price can increases. Whether you % invest of your portfolio in Bitcoin or other is individual.

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Quote from: Blitzboy on July 26, 2023, 02:06:21 PM

First, the 60-40 equity-bond portfolio with gamma=1.5 risk aversion isn't fixed, right? Market conditions, risk tolerance, and financial goals heavily influence allocation decisions.Is your 2.625 Bitcoin ideal bet fixed or flexible? Market conditions alter, thus sticking to a number could miss chances or cause problems.

Decentralization is important, but it's not everything. Utility, adoption rate, and regulatory environment can dramatically impact Bitcoin's value. Your thought experiment about Satoshi keeping all Bitcoins is intriguing, however it oversimplifies cryptocurrency valuation processes.

Since the total supply is strictly limited, and decentralization of supply is crucial to avoid market manipulation, the optimal strategy in this game for approximately eight million players (the ideal and unattainable outcome) is to possess exactly 2.625 Bitcoin and never sell (never rebalancing a portfilio).

In any case, what is 2.625 Bitcoins at the current price? It's just the cost of a new BMW 3 series or a Benz C-class. The loss from this strategy is strictly limited, while the potential profit is infinite.

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First, the 60-40 equity-bond portfolio with gamma=1.5 risk aversion isn't fixed, right? Market conditions, risk tolerance, and financial goals heavily influence allocation decisions.Is your 2.625 Bitcoin ideal bet fixed or flexible? Market conditions alter, thus sticking to a number could miss chances or cause problems.

Decentralization is important, but it's not everything. Utility, adoption rate, and regulatory environment can dramatically impact Bitcoin's value. Your thought experiment about Satoshi keeping all Bitcoins is intriguing, however it oversimplifies cryptocurrency valuation processes.

KalOlak

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Quote from: HeRetiK on July 26, 2023, 08:58:25 AM

Quote from: Darker45 on July 25, 2023, 10:20:34 PM

Anyway, the subject is misleading. You should correct it lest it be misunderstood as a mega-bullish stand of BlackRock. This actually isn't BlackRock's opinion or view. This is simply the personal view of the three authors who happened to be working with BlackRock. But this study is not in any way sanctioned by BlackRock itself.

I'm not sure I'd even call it the personal view of the authors. If you read the paper, the number quoted by OP (and various crypto-news outlets) is not even the conclusion. It's just the cherry picked result of one of two mathematical asset allocation models being applied to Bitcoin. The other model they apply, Cumulative Prospect Theory, comes to a slightly different conclusion:

Quote from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042239

In order to obtain finite solutions, we change the mean of BTC in the normal regime to correspond to a loss of 90%. That is, we set exp(𝜇2) = 0.1, or 𝜇2 = −2.303. We also change the probability of the bliss regime to 𝑝 = 0.001, with the same mean, 𝜇1, and standard deviation, 𝜎1, of the BTC bliss regime as the empirical estimate reported in Exhibit 3. This distribution has the same extreme right-hand tail payoff as the original process, but it occurs with a much smaller probability, 𝑝 = 0.001, versus the empirical estimate of 𝑝 = 0.036. Even with this tiny probability, the optimal BTC holding is 9.5% holding the 28-72 equity-bond portfolio fixed in pro-rata allocations. Exhibit 7, Panel B plots the CPT utility function for the three-asset BTC-equities-bonds portfolio. The maximum utlity corresponds to the optimal BTC holding of 9.5%, with the equity and bond holdings being held in the same 28-72 pro-rata allocation for the remaining 90.5% of the portfolio.

TL;DR: The authors apply two models, one resulting in a BTC allocation of 84.9% and a risk averse one, resulting in a BTC allocation of 9.5%. The latter one is not newsworthy nowadays, so of course everyone is only focusing on the bigger number.

(even 9.5% percent would still be huge, mind you)

It is highly probable that this paper has been shared within Blackrock's internal circulation, which is a common practice when employees co-author academic papers. Furthermore, the authors' positions seem to be at a mid- to senior-level, which further increases the likelihood of this paper being circulated internally.

Hence, the findings presented in this paper are better suited for understanding the behavior of retail investors, as they typically have a significant portion of their personal wealth invested in Bitcoin and tend to be less risk-averse compared to institutional investors. Conversely, when considering institutional investors, it would be more reasonable to assume a relatively high level of risk aversion, leading to a Bitcoin allocation closer to 10% as suggested by the model, which seems to be a more plausible scenario.

onecall123

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I'm feeling a mixed situation right now, neither good or bad.
For the past several years, there have been efforts to regulate cryptocurrencies. But, we all see it as a way to manage something that's hard to control.
The reason behind this push is that they haven't figured out how to beat the influence of bitcoin, so they're trying to adjust their approach to stay relevant.
Anyway, I'm wondering if a new bullish trend is about to start!

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Quote from: Darker45 on July 25, 2023, 10:20:34 PM

Anyway, the subject is misleading. You should correct it lest it be misunderstood as a mega-bullish stand of BlackRock. This actually isn't BlackRock's opinion or view. This is simply the personal view of the three authors who happened to be working with BlackRock. But this study is not in any way sanctioned by BlackRock itself.

I'm not sure I'd even call it the personal view of the authors. If you read the paper, the number quoted by OP (and various crypto-news outlets) is not even the conclusion. It's just the cherry picked result of one of two mathematical asset allocation models being applied to Bitcoin. The other model they apply, Cumulative Prospect Theory, comes to a slightly different conclusion:

Quote from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042239

In order to obtain finite solutions, we change the mean of BTC in the normal regime to correspond to a loss of 90%. That is, we set exp(𝜇2) = 0.1, or 𝜇2 = −2.303. We also change the probability of the bliss regime to 𝑝 = 0.001, with the same mean, 𝜇1, and standard deviation, 𝜎1, of the BTC bliss regime as the empirical estimate reported in Exhibit 3. This distribution has the same extreme right-hand tail payoff as the original process, but it occurs with a much smaller probability, 𝑝 = 0.001, versus the empirical estimate of 𝑝 = 0.036. Even with this tiny probability, the optimal BTC holding is 9.5% holding the 28-72 equity-bond portfolio fixed in pro-rata allocations. Exhibit 7, Panel B plots the CPT utility function for the three-asset BTC-equities-bonds portfolio. The maximum utlity corresponds to the optimal BTC holding of 9.5%, with the equity and bond holdings being held in the same 28-72 pro-rata allocation for the remaining 90.5% of the portfolio.

TL;DR: The authors apply two models, one resulting in a BTC allocation of 84.9% and a risk averse one, resulting in a BTC allocation of 9.5%. The latter one is not newsworthy nowadays, so of course everyone is only focusing on the bigger number.

(even 9.5% percent would still be huge, mind you)

KalOlak

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Quote from: Husires on July 26, 2023, 05:05:41 AM

People tend to spend their precious things because of human love to get some luxury, so if the price of Bitcoin rises strongly, people tend to buy, and if it drops sharply, people tend to sell in the hope of reducing losses, and this is what makes Bitcoin fluctuate greatly in levels of uncertainty, which are those levels in which the price moves to a greater extent From 10% per week.

During normal trading times, Bitcoin is mined, which continues to create a quantity supplied, unless there is a corresponding amount of supply of demand, the price of Bitcoin will decrease, and here more people will tend to buy, and so on until there is a parity in the price.

These things will make everyone not keep all of the bitcoin, but rather a part of it, and thus the continuity of trading.

You've provided a good example. Let's conduct a hypothetical thought experiment: "What if Bernard Arnault (LVMH) buys 2.625 Bitcoins than joins the religious Order 2.625 and continues to sell useless luxury for insane amounts of money?"

Let's delve into this scenario further. As a plebeian of Order 2.625, Bernard Arnault should be interested in the liquidation of the degen risk takers using exclusively Bitcoin. If Bernard Arnault chooses to liquidation of the degen risk takers using by selling them Birkin bags or expensive cognac, it goes against our Creed (84.9% Strategy). In such a case, the LVHM company could be immediately liquidated through clever manipulations by the Great Liquidators, who have control over all stock exchanges (let's assume BlackRock Company). Thus, it is more likely that someone as seemingly intelligent as Bernard Arnault would choose to adhere to the Creed (84.9% Strategy), causing the price of Birkin bags to drop from $66,666 to around $66, which is their fair price.

Husires

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People tend to spend their precious things because of human love to get some luxury, so if the price of Bitcoin rises strongly, people tend to buy, and if it drops sharply, people tend to sell in the hope of reducing losses, and this is what makes Bitcoin fluctuate greatly in levels of uncertainty, which are those levels in which the price moves to a greater extent From 10% per week.

During normal trading times, Bitcoin is mined, which continues to create a quantity supplied, unless there is a corresponding amount of supply of demand, the price of Bitcoin will decrease, and here more people will tend to buy, and so on until there is a parity in the price.

These things will make everyone not keep all of the bitcoin, but rather a part of it, and thus the continuity of trading.

Tytanowy Janusz

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A simple thought experiment can show that if Satoshi had kept all 21 million Bitcoins to himself and never shared this idea with anyone, the value of Bitcoin would be zero.
discuss

1- So go and buy all 21 million bitcoin from satoshi for zero in this scenario. i'm sure he won't give them away at this price. During ICO all coins are in hands of DEVS and yet they collect hundreds of millions for few % of supply.
2- satoshi never had 21 million bitcoins. When wrote his last post on bitcointalk (when he disappeared from crypto space), there were only 20% of bitcoins mined.

"After all, the value of Bitcoin as an asset lies precisely in the decentralization of its supply." - why? the dollar is the strongest and most widely used currency, and its supply is far from being decentralized. The network is to be decentralized, miners should be decentralized, not supply. This is proof of work, not proof of stake

avikz

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"Starting with 60-40 equity-bond portfolio, which is produced with a risk aversion of gamma=1.5, the optimal BTC allocation is a large 84.9%"

My calculations show that the optimal bet in Bitcoin is still an absolute value of 2.625 Bitcoin, as it allows for sufficient decentralization of the supply among approximately eight million holders (Top 0.1%). After all, the value of Bitcoin as an asset lies precisely in the decentralization of its supply. A simple thought experiment can show that if Satoshi had kept all 21 million Bitcoins to himself and never shared this idea with anyone, the value of Bitcoin would be zero.

discuss

Circulation and decentralization is the backbone of bitcoin. I am never very supportive to the fact that the large corporates buying into bitcoin. It ends the decentralization effectively and ensure that the corporates control the crypto market. It is never an ideal situation. While corporate investment increases the liquidity in the market, but they get the power to control the market.

Companies like Blackrock is here because they sniff profit. Think what will happen when these large corporations will start booking their profits! Bitcoin should stay in the hands of the common public and not in the hands of the corporates.

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Before even starting a discussion on the statement I would like to discuss the originator of the statement, Blackrock itself.

Same Blackrock involved in $4B investment scandal with CEO and portfolio manager all involved.

My question is not about if bankers are good or bad, I don't care if I think they are bad. My question is, for someone who has history of making terrible investment advices, why should we listen to them about Bitcoin?

adaseb

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Merit: 1723

Yes it’s optimal but doesn’t mean it will happen. I am assuming they got the 2.65BTC by taking 21 million and dividing by 8 million.

The way blackrock will make money is not by holding BTC but by the fees earned from the management of the fund. Every year they will get like 0.1% whether the price goes up or down. That’s the goal. The more people buy the fund, the more money they will make in fees.

Darker45

legendary

Activity: 2576

Merit: 1860

I seriously doubt BlackRock would adopt this analysis and view. This may be something that can easily be adopted by much smaller individual or retail investors like me. But to an institution that is worth billions and is managing trillions, I don't think this is worth the risk. Whatever happened to diversification?

This is so different from the views of other respected figures in the world of finance. The same paper cited Thomas Peterffy's 2%-3% and Ray Dalio's 1%-2%.

Anyway, the subject is misleading. You should correct it lest it be misunderstood as a mega-bullish stand of BlackRock. This actually isn't BlackRock's opinion or view. This is simply the personal view of the three authors who happened to be working with BlackRock. But this study is not in any way sanctioned by BlackRock itself.

blue Snow

legendary

Activity: 1526

Merit: 1032

Up to 300% + 200 FS deposit bonuses

After all, the value of Bitcoin as an asset lies precisely in the decentralization of its supply.

Sure. BlackRock only holds the Bitcoin stock!. they don't like MicroStrategy company and Saylor who really bought the bitcoin on the market.
so whatever BlackRock bought, that does not affect anything on bitcoin supply. The supply is still intact in the wallet that owns the real Bitcoin. Because the company still thinks, this instrument is the same as their asset like a stock which I think is really different from others.

goldkingcoiner

legendary

Activity: 2240

Merit: 2003

A Bitcoiner chooses. A slave obeys.